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Here’s why CLSA believes market expectations should be moderate post US-China phase-I trade deal

Updated : December 16, 2019 12:42 PM IST

The United States and China announced phase-1 trade deal that includes some tariff relief.

Below are three important outcomes of the phase-I talks:

  • US won’t be charging 15 percent on $160 billion of Chinese goods which were slated to go into effect on December 15, 2019. China too will halt what it would have done in response to US action.

  • The 25 percent tariff on $250 billion worth of Chinese goods will stay

  • The USD 120 billion on which US had started charging 15 percent tariff in September would be halved to 7.5 percent.

Voicing his opinion on the above development, Eric Fishwick, CLSA said, "We expect that the Phase-1 deal will be it. This means that US tariffs on around $250 billion of Chinese exports remain subject to 25 percent tariffs with 7.5 percent tariffs on a further $120 billion. This is not a tariff removal that will move the dial on world trade."

"As a best-case forecast we expect that the optimism will fade quickly. The danger, given the prevailing hawkishness towards China across the US political spectrum, is that facing a lack of progress Trump ups the criticism of China for domestic political reasons. For this reason our forecast is that trade tensions will remain high. Our recommendation is that investors focus on what happens next," he further stated.
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